Extreme Data Leak; What We Know So Far About the Panama Papers

Although data storage solutions may soon become crash-tolerant, they may never become leak tolerant.

One of the most significant data breaches of the 21st century is currently making headlines around the world; the infamous Panama Papers have finally hit the mainstream media, and very wealthy heads are rolling as a result.

The detailed banking documents belonging to the Panamanian corporate service provider Mossack Fonseca were leaked to the public this month and revealed the way that many wealthy individuals, both privately and publicly known, have been taking advantage of the offshore business entity to hide their assets and avoid taxes.

The story actually dates back to the early months of 2015, when an anonymous whistleblower under the alias “John Doe” began to leak documents in batches to German newspaper Süddeutsche Zeitung. The documents constituted terabytes of information and listed transactions dating back as early as the 1970’s. The leak was so immense that the newspaper was forced to enlist the help of the International Consortium of Investigative Journalists, which then shared the burden of investigating and analyzing the documents among 400 journalists at 107 media organizations in 76 countries. It has taken until April 3, 2016 for the first news reports based on the documents to be ready for publishing. The ICJ has since promised to publish a full list of companies associated with the papers by early May 2016.

But what do the papers actually reveal about the people who frequented Mossack Fonseca? It varies from case to case, but some basic facts to keep in mind are the following:

Firstly, a jurisdiction is generally seen as an offshore financial center, often called a “tax haven,” if and when its banking infrastructure provides services primarily to people or businesses who are not its residents, it requires little or no disclosure of information when doing business with its customers, and it offers very low taxes.

Customers in a tax haven may want offshore accounts for reasons that are completely legal and not necessarily unethical. That said, it’s much more common for businesses to use tax havens to avoid taxes. As Igor Angelini, head of Europol’s Financial Intelligence Group, recently disclosed, shell companies that are used for this purpose tend to “play an important role in large-scale money laundering activities” and that they can also be used to “transfer bribe money.”

So where do law firms like Mossack Fonseca come in? Offshore financial operations generally necessitate the help of law firms, and Mossack Fonseca is one of the biggest the business of Panamanian offshore banking. Its documents were leaked and its service to its clients (which included the incorporation and operation of shell companies in friendly jurisdictions on their behalf) were exposed. Basically, Mossack Fonseca was responsible for creating shell company structures that were both legal and enabled clients to use their money in a way that was completely secret. Part of the information leaked by the Panama Papers revealed how these intricate structures were set-up on a multi-level and multi=national corporate scale.

As it stands, Mossack Fonseca has over 300,000 newly revealed corporate customers, most of which are registered in financial centers that are located in British Overseas Territories. The tax haven services that it offers has been said to enable the transfer of drug and dirty money and is said to cost developing countries somewhere around $213 billion annually.

As far as the cultural effects of this now public information, the results continue to roll out. Edward Snowden called the Panama Papers the “biggest leak in the history of data journalism,” and Micah White, co-founder of Occupy, stated that “…the Panama Paper are being dissected via an unprecedented collaboration between hundreds of highly credible international journalists who have been working secretly for a year. This is the global professionalization of leaktivism. The days of WikiLeaks amateurism are over… This is a unique opportunity to test the effectiveness of leaktivism.”

So far leaktivism seems pretty effective; the Prime Minister of Iceland, Sigmundur Davio Gunnlaugsson, has since been forced to step down, while other major rulers remain vulnerable after having been named by the papers, including the president of the UAE, Ukraine, and King Salman of Saudi Arabia.